Equity Market Misvaluation, Financing, and Investment

• 成果类型: Article
• 署名作者: Warusawitharana, Missaka; Whited, Toni M.
• 署名单位: Federal Reserve System - USA; Federal Reserve System Board of Governors; University of Michigan System; University of Michigan; National Bureau of Economic Research
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhv066
• 发表日期: 2016
• 页码: 603
• 关键词: capital structure; corporate-investment; asset prices; structural estimation; earnings management; measurement error; FIRMS INVESTMENT; GMM estimation; stock-prices; decisions

摘要

We estimate a dynamic investment model in which firms finance with equity, cash, or debt. Misvaluation affects equity values, and firms optimally issue and repurchase overvalued and undervalued shares. The funds flowing to and from these activities come from investment, dividends, or net cash. The model fits a broad set of data moments in large heterogeneous samples and across industries. Our parameter estimates imply that misvaluation induces larger changes in financial policies than investment. The investment responses are strongest for small firms but nonetheless modest. Managers' rational responses to misvaluation increase shareholder value by up to 4%.